The Royal Mint is partnering with American derivatives exchange CME Group to launch a new digital gold product and trading platform using blockchain, the technology that underpins Bitcoin.

The new product, dubbed Royal Mint Gold (RMG), will offer a digital record of ownership for gold stored in the Royal Mint's on-site bullion vault, which can be traded on a platform developed and operated by CME Group that will run 24 hours a day.

RMG is expected to launch in 2017 with an initial offering worth up to $1 billion (£805 million), with more to be issued according to market demand.

Royal Mint chief financial officer Vin Wijeratne said: "Until now, there hasn't been a way to digitally trade physical gold.

"Developing a trading platform with CME Group will satisfy customer demands for faster, cost-effective and secure ways to buy, hold and sell gold and complement our existing products. This landmark partnership allows us to combine the world's leading mint, the best futures trading platform globally and best in class technology."

Royal Mint and the CME Group say the new product strips away management fees and ongoing storage charges that are usually levied for traditional spot gold holdings.

RMG holders will have the option to converting their digital records into physical gold with no storage costs.

The new platform will be run using blockchain technology, which was originally developed as a hub to track transactions in crypto-currencies including Bitcoin, but has since gained traction among mainstream banks and financial institutions.

It is widely seen as an opportunity to strip costs, serving as a central ledger to track and verify transactions that cuts out the need for fee-charging middlemen.

Julie Winkler, senior managing director of research, product development and index services at CME Group, said: "Developing a digital gold trading platform will help ensure that CME Group's current product offerings meet the evolving needs of the global marketplace.

"As we continue to expand our global footprint and develop new products, this platform will help set standards for digital assets in financial markets."